What Happens After a Huge Tax Cut? Take a Look at North Carolina

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Grover Norquist and other anti-tax advocates have pointed to North Carolina as an example of tax and spending policies done right. “North Carolina has dramatically cut taxes and held down spending. That is the model,” Norquist tweeted early this year after critics pointed to the budgetary failures of tax cuts implemented in Kansas.

So how is that model playing out? It’s a question with national implications given the tax bill likely headed to President Trump’s desk this month. “Changing the national tax code is much different from changing a state’s code,” Todd C. Frankel writes in The Washington Post. “But what’s happening today in North Carolina offers potential clues about the grand experiment with tax cuts the entire nation is close to embarking on.”

Frankel’s summary: “North Carolina has enjoyed the same steady growth as much of the country.” The state has fared better than Kansas since it started rolling back taxes in 2013. But it’s hard to tease out how much of that is related to tax cuts and how much stems from non-tax factors.

“The tax changes in North Carolina haven’t produced the fiscal calamity that led Republican legislators in Kansas this year to reverse dramatic cuts they passed a few years earlier,” Frankel writes, “but nor have they produced the kind of win-for-all economic prosperity national Republicans say their effort will spur.” In the meantime, the state projects a budget squeeze of at least $1.2 billion starting in 2019.

As editor in chief, Yuval Rosenberg oversees all aspects of The Fiscal Times' website and email newsletter. His writing has appeared in publications including BusinessWeek, CNBC.com, CNNMoney.com, Fast Company, Fortune, Newsweek, Money and Time.